If you’re an expat with dreams of starting your own business in Dubai, one of the biggest decisions you’ll need to make is whether to set up in a Free Zone or on the Mainland. Both options come with their sets of benefits and challenges, and your choice will influence everything from costs and timelines to how you operate your business on a day-to-day basis.

So, which is the better choice for you? Let’s take a deep dive into the pros and cons of both Free Zone and Mainland setups. By the end of this guide, you’ll have all the information you need to make an informed decision!

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What this Blog Covers:

1) What is the difference between Free Zone and Mainland?

2) What are the Costs of Setting up a Business

2.1) Costs in a Free Zone

2.2) Costs in Mainland

3) How long it takes to set up a company in Dubai

4) Advantages and Disadvantages of Free Zone companies

5) Advantages and Disadvantages of Mainland companies

6) Which option is right for you?

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1 - What is the difference between Free Zone and Mainland?

Before diving into the nitty-gritty, here’s a quick look at what differentiates a Free Zone from the mainland. The main distinction lies in the fact that Mainland businesses are registered directly under the UAE Government, while Free Zone companies are registered within specific trading areas set up by individual authorities and often ran similarly to a private entity.

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Free Zones

• Geographical areas specifically designated for businesses.
• Tailored for industries like tech, media, logistics, and finance.
• 100% ownership allowed without needing a local sponsor.
• Restrictions on direct trade with the local UAE market.

Mainland

• Refers to businesses registered under the UAE government (not confined to Free Zones).
• Operate freely within the local UAE market.
• Historically required a UAE national as a local sponsor, though changes in laws now allow 100% foreign ownership in certain industries.

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Get Help Setting Up your Business in Dubai. Contact Us Today.

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2 - Costs of Setting Up a Business in the UAE: Free Zone vs Mainland

One of the first questions most entrepreneurs ask is: “How much will it cost me?” The amount of money you need to open your business will vary significantly based on your company type and requirements. For example, a company with 2 people will not cost the same as a company with 50; and a crypto trading business license, comes with a completely different cost to getting a trade license for e-commerce. In addition, the cost can also highly vary depending on the Free Zone you choose (which have very large ranges of prices) or if you decide to register in Mainland.

Here’s a rough breakdown of expected costs:

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Business Set Up Costs in a FreeZone:

1. Business License Fees:
2. • Ranges from AED 10,000 to AED 50,000 annually, depending on the Free Zone you choose.
   • Some Free Zones bundle the license with office space, which can save money upfront.
3. Office Space Rental:
4. • In most cases, renting an office space is compulsory, even if you don’t plan on using it.
   • Many Free Zones offer shared or co-working spaces, starting at AED 10,000/year.
   • Renting a private office can range from AED 15,000 to AED 30,000/year.
5. Registration Fees:
6. • Initial company setup and trade name registration may cost between AED 8,000 and AED 15,000, depending on the Free Zone regulations.
7. Visas:
8. • Investor visa costs AED 4,000–AED 7,000, plus additional expenses for employees or dependents.

If you want a full breakdown of Incorporation costs, we have put together a guide with a calculator which you can access here.

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Pro Tip: Look out for Free Zone promotions where licenses and visas are bundled together at discounted rates. If you’re not sure how to find these, simply reach out to us.

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Business Set Up Costs in Mainland:

1. Business License Fees:
2. • Mainland licenses are often more expensive, typically ranging from AED 20,000–AED 50,000.
3. Office Space Rental:
4. • A physical office is mandatory for mainland companies. Small offices can cost around AED 30,000/year, going up to AED 150,000/year in prime areas.
5. Local Sponsor Fees (if applicable):
6. • A UAE national must hold a 51% share in certain mainland businesses, though 100% foreign ownership is now allowed for many industries. Sponsor fees range from AED 10,000 to AED 25,000 annually (but involve little active partnership).
7. Other Fees:
8. • Additional permits/licenses for specialized industries (e.g., healthcare or construction) may cost between AED 5,000 and AED 10,000.
   • It’s recommended to also account for legal fees when setting up in Mainland, as the company structure and legal requirements may need the involvement of a lawyer, depending on the type and size of your business.

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3 - How long it takes to set up a company in Dubai

Timelines are another crucial factor to consider when incorporating your business in Dubai (or the UAE). How long it takes can impact your moving timelines, business development pipeline and workflows, so make sure to plan ahead! The process for opening a company will highly vary from Zone to Zone, so here's a rough guide:

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Free Zone Timelines:

• If you have all the necessary documents to apply for a company registration, it can be as fast as 5 business days if expedited, particularly for straightforward setups. However, a normal time frame is usually 2 weeks, as there are many different documents that need to be issued in order for your company to be legally created in the UAE.
• Free Zones usually offer aster approvals and less documentation requirements compared to the Mainland processes.

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Mainland Timelines:

• In Mainland, company registration typically takes 2–4 weeks due to additional steps like approvals from the Department of Economic Development (DED), notarizations, and potential local sponsorship agreements.
• If multiple approvals are needed from various Government departments, you can expect longer approval times. This is often the case of businesses that require additional evaluations such as restaurants, retail, or healthcare companies.

Key Insight: Time-sensitive entrepreneurs often prefer Free Zones for their quick and efficient incorporation process.

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4 - Advantages and Disadvantages of Free Zone Companies

There’s a reason why many entrepreneurs opt for setting up with a Free Zone, but of course, this can also come with some drawbacks. Let’s review all the pros and cons:

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Advantage 1: 100% Ownership

Unlike mainland companies that historically required a UAE national to own 51%, Free Zones allow complete ownership across all industries.

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Advantage 2:  Tax Benefits

• No corporate tax in most Free Zones (except for certain industries under UAE’s new corporate tax regime).
• No customs duties for imports or exports.

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Advantage 3: Simplified Registration

Free Zone authorities are known for their streamlined setups and lesser documentation requirements.

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Advantage 4: Affordable Office Space

Co-working and virtual office solutions reduce overhead costs, which is particularly useful for startups and online businesses.

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Advantage 5: Industry-Specific Zones

Free Zones often cater to specific industries (e.g., Dubai Internet City for tech startups, Dubai Media City for media businesses, Dubai International Financial Center for Financial companies, etc...) - This matters because it connects you to relevant networks, talent and companies, and it lays out foundations that are going to benefit your business in the long term in regards to regulations, requirements and business development opportunities.

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Now let’s look at the disadvantages...

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Disadvantage 1: Trading Restrictions

Free Zone businesses are limited to international trade or business within the Free Zone itself. Direct interaction with the UAE’s local market (mainland) isn’t allowed unless you work with a distributor.

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Disadvantage 2: Limited Growth Opportunities

Scaling your operations to target the local market can be complicated and costly when based in a Free Zone.

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Disadvantage 3: Location-Specific Limitations

Your base of operation (area designated to the Free Zone) may restrict where you can recruit staff, ship goods, or collaborate with local businesses depending on your license and business model.

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5 - Advantages and Disadvantages of Mainland Companies

While incorporating in a FreeZone may seem like the fastest and easiest route, there are some instances in which you may want to considering registering with Mainland instead. Especially, if you would be able to benefit from from local trading advantages. Let’s get into it:

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Advantage 1: No Market Restrictions

Mainland companies can trade, operate, and offer services across Dubai, the UAE, and internationally without restrictions.

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Advantage 2: Certain Industries Require Mainland Setup

If you’re planning to start retail, hospitality, or a restaurant, mainland incorporation is your only option.

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Advantage 3: Flexibility

You’re not tied to specific zones—you can choose your location, office setup, or business model as you grow.

What about the disadvantages of Mainland?

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Disadvantage 1: Costs

Mainland businesses require higher upfront capital and running expenses, including office rents and potential sponsorship fees.

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Disadvantage 2: Historically Dependent on Local Sponsors

While the 51% ownership rule has changed in some cases, this restriction still applies to specific industries like oil and gas.

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6 - Which Option Is Right for You?

Ok, you’ve read the article but you’re still unsure unsure whether to go Free Zone or Mainland. Let’s do an exercise to help you understand which option may be best for you:

Start by asking yourself these key questions:

1. Who is your target customer?
2. • Are you targeting local UAE customers? Do you need to trade items in the UAE? If yes, then Mainland is the way to go.
   • Are you targeting international markets? Then a Free Zone may give you more flexibility and cost-effectiveness.
3. What’s your budget?
4. • Free Zones are more affordable for startups, while mainland companies often require higher investment.
5. Is scalability important?
6. • If you plan to expand locally or open physical stores, then mainland is a better fit.

For the vast majority of Expats moving to the UAE, the right choice will be to incorporate under a Free Zone structure. However, it’s always worth having a chat with a Expert who is able to help you make the right decision for your business. And that’s exactly why we’re here! Simply get in touch and we’ll help you take your first step when moving to the UAE as a Business Owner.

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FAQs About Free Zone vs Mainland

1. Can I own my mainland company outright?

‍Yes! Recent law reforms allow 100% foreign ownership for several industries, though some exceptions apply. Get in touch if you’d like to learn more.

2. Which option is more popular for Expats - Free Zone or Mainland incorporation?

Most Expats choose to incorporate their business in a Free Zone. This is the ideal structure for Online type of businesses and it requires less capital to manage.

3. Can I relocate my business from a Free Zone to the mainland?

‍Yes, it’s possible, but the process can be complex and may involve paying a migration fee.

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All in all, choosing between a Free Zone and mainland setup in Dubai boils down to your business goals, operating plans, and budget. If you’re a startup focused on international trade, a Free Zone setup might be the smartest choice. However, if you plan to scale your business locally and have physical shops in the UAE, a mainland license is essential.

Need tailored advice? Our experts can help you weigh your options and calculate your costs. Contact us today or use our handy Business Setup Calculator to start building your company in Dubai today!